11 Aug Raising a special levy

There are a number of differences between normal levies and special levies, especially with regards to raising each kind of levy.

Normal levies
All owners in a scheme are liable to pay their share of the normal levies. Levies are calculated and raised based on the budgeted expenditure for each financial year of the scheme. The levy contributions are used for the day-to-day running expenses of the body corporate. All the owners in the scheme have the opportunity to participate in determining the levies which is approved at the annual general meeting. Following the annual general meeting, the trustees must sign a resolution confirming the levies for the ensuing year. Owners are then billed accordingly.

Special levies
A special levy is different in that it does not require the input or approval of all the owners in the scheme but only that of the board of trustees. The trustees can decide at any time that a special levy is required and they can make the decision at a normal trustee meeting, it doesn’t require a general meeting or any other general meeting. It is always advisable that the trustees prepare and sign a suitable resolution to confirm the decision taken to raise the special levy.

A special levy may only be raised for unforeseen expenses for which the body corporate has not made provision for in its annual budget. The special levy must be necessary and cannot be raised to inflate the coffers of the body corporate. When informing the owners of the special levy, the trustees must indicate how much the special levy will be and for what the special levy will be used. It must be noted that a special levy cannot be raised and used for expenses which have already been budgeted for in the budget of the body corporate. The trustees may decide over how long a period the owners may pay their special levy contributions, i.e. as a lump sum or over a longer period of time.

How do levies affect a property sale?
The liability of an owner to pay for a normal levy and a special levy when they sell their unit also varies. When an owner sells their apartment, the payment of the normal levies will transfer to the new owner on a pro rata basis or the remainder of the financial year. A special levy will become payable by the seller in full before transfer can take place.
It is important for prospective purchasers into a sectional title scheme to familiarise themselves with the financial position of the body corporate. This will allow them to consider their investment into the scheme and not be faced with a sudden special levy due to financial mismanagement.